Section 45(5A) of Capital Gains is prospective in nature not retrospective

Section 45(5A) is prospective in nature not retrospective. The section provides that the date of handover of the possession is the criteria to consider capital gains and not the date of agreement.

ABCAUS Case Law Citation:
ABCAUS 2943 (2019) (05) ITAT

Important Case Laws Cited/relied upon by the parties
Potla Nageswara Rao vs. DCIT
Smt. G. Sailaja vs ITO

The assessee was an individual who during the relevant assessment year entered into development agreement with a builder for development of the immovable property.

However, the assessee did not admitted any capital gains in the return of income filed for the relevant A.Y.

The case of the assessee was reopened u/s 147 of the Income Tax Act, 1961 (the Act) on the ground that there was an escapement of income. The Assessing Officer (AO) noted that as per the information received in his office, assessee along with co-owner had entered into a development agreement, in pursuance of which the assessee was to receive the four flats including common area towards share along with proportionate undivided share in land.

The Assessing Officer noted that the assessee was liable for capital gains in lieu of the development agreement as assessee was entitled to 04 flats along with undivided share of land in lieu of land forgone as per development agreement and the capital gain arises from the date of execution of development agreement.

The Assessing Officer issued notice to the assessee to explain why the capital gains cannot be taxed in the hands of the assessee. In response to the notice issued, the assessee has submitted that the she had received the land from her husband without payment of any consideration. The builder had not completed the development of the building as agreed and left the project in the middle without completing in all respects. The assessee along with another co-owner and other flat buyers got the building completed and took the possession of the same after the four years.

However, the assessee could not file any details in respect of non completion of the project and also to substantiate that the assessee along with others completed the project.

Therefore, the Assessing Officer by considering the decision of the Hon’ble Jurisdictional High Court and also considering the date of agreement as per section 2(47)(v) of the Act calculated the Short Term Capital Gain.

In appeal, the CIT(A) confirmed the order of the Assessing Officer.

Before the Tribunal, the assessee inter alia contended that as per sub-section (5A) to section 45, date of handover of the possession is the criteria to consider for the purpose of calculation of capital gains and not the date of agreement.

The assessee submitted that though, the proviso was inserted by the Finance Act, 2017  effective from AY 2018-19 which is beneficiary in nature, the same has to be applied to the assessee’s case and submitted that the date of handover of the possession of the property had to be considered for calculating the capital gains and not the date of agreement.

The Tribunal observed that the above ground was not raised neither before the Assessing Officer nor before the CIT(A). Even before the Tribunal the same was not raised and only orally submitted. Therefore, the Tribunal declined to consider it though it was a legal ground.

The Tribunal stated that the assessee had not given any reason by filing a petition for admission of additional ground why the same was not raised before the lower authorities.

However, the Tribunal pointed out that this issue had been considered by the coordinate Bench of the Tribunal wherein it was held that the amendment made by the Legislature by inserting sub-section (5A) to section 45, is only prospective in nature and not in retrospective. In view of the above, the argument of the assessee was rejected.

Accordingly, the Tribunal dismissed the appeal filed by the assessee.

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